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Cadence Design Systems Inc. (CDNS) Stock

Cadence Design Systems Inc. Stock Details, Movements and Public Alerts

Cadence Design Systems (CDNS): The $80B EDA Software Oligopoly Powering Every AI Chip

Anirudh Devgan, CEO since 2021, leads the duopoly controlling electronic design automation—the specialized software used to design every modern semiconductor. When Nvidia engineers design the next H100 AI accelerator, when Apple creates the A18 chip, when Intel develops new Xeon processors, they use Cadence's Virtuoso, Genus, and Innovus tools to simulate, verify, and optimize billions of transistors. The EDA market is a $15 billion oligopoly split between Cadence (45% share) and Synopsys (45%), with minimal competition due to 30+ years of IP accumulation and tool switching costs exceeding $10-50 million for chip designers. Cadence generates $4.5 billion in annual revenue from subscription software licenses, earning 35% operating margins on capital-light SaaS economics. With AI chips requiring 5-10x more design complexity than traditional processors, Cadence captures structural tailwinds from semiconductor R&D spending—estimated at $100+ billion annually and growing 15%. Trading at 45x forward earnings, the stock commands a premium for oligopoly positioning in mission-critical semiconductor infrastructure with 18-20% revenue growth and improving profitability.

52-Week Range

$376.45 - $221.56

-9.68% from high · +53.46% from low

Avg Daily Volume

1,950,904

20-day average

100-day avg: 1,810,634

Fundamentals

Valuation Metrics

P/E Ratio (TTM)

93.35

Above market average

Forward P/E

44.05

Earnings expected to grow

PEG Ratio

3.08

Potentially overvalued

Price to Book

18.90

EV/EBITDA

54.27

EPS (TTM)

$3.72

Price to Sales

18.59

Beta

0.99

Less volatile than market

How is CDNS valued relative to its earnings and growth?
Cadence Design Systems Inc. trades at a P/E ratio of 93.35, which is above the market average of approximately 20. This premium valuation suggests investors expect above-average growth or the company has competitive advantages justifying the higher multiple. Looking ahead, the forward P/E of 44.05 is lower than the current P/E, indicating analysts expect earnings to grow over the next year. The PEG ratio of 3.08 indicates a premium valuation even accounting for growth.
What is CDNS's risk profile compared to the market?
With a beta of 0.99, Cadence Design Systems Inc. is less volatile than the overall market. This means when the market moves up or down by 10%, this stock typically moves less than 10% in the same direction. Lower beta stocks are often preferred by conservative investors seeking stability. The price-to-book ratio of 18.90 shows investors value the company above its book value, which often reflects intangible assets or growth prospects.

Performance & Growth

Profit Margin

19.90%

Operating Margin

29.30%

EBITDA

$1.79B

Return on Equity

21.80%

Return on Assets

11.70%

Revenue Growth (YoY)

20.20%

Earnings Growth (YoY)

-29.80%

How profitable and efficient is CDNS's business model?
Cadence Design Systems Inc. achieves a profit margin of 19.90%, meaning it retains $19.90 from every $100 in revenue after all expenses. This is an impressive margin, indicating strong pricing power and efficient cost management that allows the company to generate substantial profits. The operating margin of 29.30% reveals how efficiently the company runs its core business operations before interest and taxes. With ROE at 21.80% and ROA at 11.70%, the company generates strong returns on invested capital.
What are CDNS's recent growth trends?
Cadence Design Systems Inc.'s revenue grew by 20.20% year-over-year, representing robust expansion that significantly outpaces typical market growth rates. This strong top-line performance suggests the company is successfully capturing market share or benefiting from favorable industry trends. Earnings decreased by 29.80% year-over-year, reflecting the bottom-line impact of business performance. These growth metrics should be evaluated against SOFTWARE - APPLICATION industry averages for proper context.

Company Size & Market

Market Cap

$94.6B

Revenue (TTM)

$5.09B

Revenue/Share (TTM)

$18.72

Shares Outstanding

272.49M

Book Value/Share

$18.37

Asset Type

Common Stock

What is CDNS's market capitalization and position?
Cadence Design Systems Inc. has a market capitalization of $94.6B, classifying it as a large-cap stock ($10B-$200B). Large-caps are typically industry leaders with established business models, offering a balance of stability and growth potential. They often provide dividend income and are core holdings in institutional portfolios. With 272.49M shares outstanding, the company's ownership is relatively concentrated. As a participant in the SOFTWARE - APPLICATION industry, it competes with other firms in this sector.
How does CDNS's price compare to its book value?
Cadence Design Systems Inc.'s book value per share is $18.37, while the current stock price is $340.00, resulting in a price-to-book (P/B) ratio of 18.51. This high P/B ratio indicates significant intangible assets, strong brand value, or high growth expectations. Technology and consumer brand companies often trade at elevated P/B ratios due to intellectual property and competitive advantages not reflected on the balance sheet. As a common stock, this represents equity ownership with voting rights.

Analyst Ratings

Analyst Target Price

$370.84

9.07% upside potential

Analyst Recommendations

Strong Buy

4

Buy

14

Hold

4

Sell

1

Strong Sell

0

How reliable are analyst predictions for CDNS?
23 analysts cover CDNS with 78% recommending buy/strong buy ratings. Analyst predictions have mixed reliability - studies show consensus rarely beats market returns consistently. The strong bullish consensus may already be priced in. The consensus target of $370.84 implies 9.1% upside, but targets are often adjusted to follow price moves rather than predict them.
What is the Wall Street consensus on CDNS?
Current analyst recommendations:4 Strong Buy, 14 Buy, 4 Hold, 1 Sell, 0The bullish tilt suggests optimism about future prospects, though investors should conduct independent research.Remember that analyst opinions often lag price movements and can be influenced by investment banking relationships.

Fundamentals last updated: Oct 6, 2025, 06:46 PM

Technical Indicators

RSI (14-day)

45.50

Neutral

50-Day Moving Average

$353.33

-3.77% below MA-50

200-Day Moving Average

$306.03

11.10% above MA-200

MACD Line

-0.37

MACD Signal

1.13

MACD Histogram

-1.50

Bearish

What does CDNS's RSI value tell investors?
The RSI (Relative Strength Index) for CDNS is currently 45.50, indicating the stock is in neutral territory (40-60 range). Neither buyers nor sellers have clear control, suggesting consolidation or balanced market forces. Combined with the price being below the 50-day moving average, this confirms bearish conditions.
How should traders interpret CDNS's MACD and moving average crossovers?
MACD analysis shows the MACD line at -0.37 below the signal line at 1.13, with histogram at -1.50. This bearish crossover indicates downward pressure. The wide histogram confirms strong momentum. The 50-day MA ($353.33) is above the 200-day MA ($306.03), forming a golden cross pattern that typically signals a long-term uptrend. Price is currently between the MAs, suggesting transition.

Indicators last updated: Oct 8, 2025, 12:44 AM

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Cadence Design Systems (CDNS) Stock Analysis 2025: Complete Investment Guide

The Software Invisible Behind Every Chip

Designing a modern semiconductor with 100 billion transistors is impossible without EDA software. Cadence's tools handle three critical functions: Virtuoso (custom analog/mixed-signal design for specialized chips), Genus (digital synthesis converting designs into transistor layouts), and Innovus (place-and-route optimizing chip layouts for performance/power). Anirudh Devgan, former head of R&D who became CEO in 2021, inherited a company generating $3 billion revenue with strong competitive positions but facing growth questions as Moore's Law slowed. His strategy: double down on AI-driven design tools (using AI to optimize chip layouts faster than human engineers), expand into system design and verification (software-hardware co-design), and capture hyperscaler customers (Google, Amazon, Microsoft) building custom AI chips. By 2024, Cadence generates $4.5 billion in revenue growing 18% annually, with 500+ semiconductor customers including every major chip designer globally. The business model is subscription software: customers pay $500K-5M annually per design team for perpetual access to tools, creating 95%+ recurring revenue streams.

Business Model & Competitive Moat

Cadence's moat is IP accumulation and switching costs. Over 30+ years, the company built databases of transistor models, design libraries, and verification methodologies representing billions in R&D. Switching to competitors requires re-training 50-500 engineers (costs $10-50M), re-verifying designs (18-36 months), and risking chip failures (tapeout errors costing $5-20M per revision). This creates customer captivity—semiconductor companies renew Cadence subscriptions at 95%+ rates rather than endure switching pain. The duopoly with Synopsys (combined 90% market share) creates rational pricing: both companies raise prices 3-5% annually without losing customers. Cadence also benefits from semiconductor industry growth—global chip R&D spending exceeds $100 billion annually (15% of $700B semiconductor revenue), and every 1% increase in R&D translates to $150M additional TAM for Cadence. The weak point: some large customers (Intel, Samsung) develop proprietary EDA tools internally to reduce dependence. However, Devgan's AI-powered design tools (using machine learning to optimize layouts 10x faster) create new differentiation competitors can't easily replicate.

Financial Performance

  • •Revenue: $4.5B (2024), up 18% driven by AI chip design and hyperscaler customers
  • •Operating Margin: 35%, best-in-class among design software companies
  • •Net Income: $1.4B, forward P/E of 45x (premium to S&P 500 reflects quality)
  • •Recurring Revenue: 95% of sales from multi-year subscriptions (SaaS-like predictability)
  • •Free Cash Flow: $1.8B (40% of revenue), funding $300M buybacks annually
  • •Net Cash: $1.2B (zero debt), fortress balance sheet

Growth Catalysts

  • •AI Chip Explosion: Nvidia, AMD, Google, Amazon, Meta all designing custom AI accelerators (Cadence customers)
  • •Advanced Packaging: 3D chip stacking (chiplets) requires new design tools—Cadence's Integrity 3D-IC platform
  • •Automotive Electronics: Electric vehicles contain $2,000+ in semiconductors vs. $500 for ICE cars—design complexity surge
  • •Hyperscaler Adoption: Google's TPU, Amazon's Graviton, Microsoft's Maia chips all designed with Cadence tools
  • •AI-Powered Design: Cerebrus AI platform automating chip design, reducing time-to-market 30-50%
  • •System Design Expansion: Software-hardware co-design tools capturing $5B+ addressable market beyond pure EDA

Risks & Challenges

  • •Semiconductor Cycle: Chip industry downturns reduce R&D budgets 10-20%, pressuring Cadence sales
  • •Customer Concentration: Top 10 customers represent 40%+ of revenue; Intel/Samsung losses would hurt
  • •Open-Source EDA: Academic/startup tools (OpenROAD) attempting to commoditize basic design functions
  • •Geopolitical Risk: 30% revenue from China vulnerable to export restrictions, trade wars
  • •Synopsys Competition: Rival investing $1B+ annually in R&D, threatening Cadence's technology lead
  • •Valuation Risk: 45x forward P/E leaves little room for disappointment; growth slowdown = 20-30% correction

Competitive Landscape

CompanyEDA RevenueMarket ShareKey Strength
Cadence (CDNS)$4.5B45%Custom/analog design
Synopsys (SNPS)$5.8B45%Digital + IP licensing
Siemens EDA$1.2B8%PCB/system design
Ansys (ANSS)$2.5BN/A (simulation)Multi-physics simulation

Cadence and Synopsys control 90% of the pure EDA market, with minimal overlap—Cadence dominates custom/analog design while Synopsys leads digital synthesis and IP. This duopoly structure creates pricing discipline and limits competitive threats. Anirudh Devgan's AI strategy differentiates Cadence as the innovation leader in next-generation design automation.

Who Is This Stock Suitable For?

Perfect For

  • ✓Growth investors seeking semiconductor exposure without manufacturing risk
  • ✓AI thematic investors (Cadence tools design all AI chips)
  • ✓Software SaaS investors valuing 95% recurring revenue and 35% margins
  • ✓Long-term compounders (oligopoly economics, structural tailwinds)

Less Suitable For

  • ✗Value investors (45x forward P/E is premium, not cheap)
  • ✗Income investors (0.6% dividend yield negligible)
  • ✗Conservative investors uncomfortable with semiconductor cyclicality
  • ✗Short-term traders (low volatility, premium valuation limits near-term upside)

Investment Thesis

Cadence Design Systems represents oligopoly software economics applied to the high-growth semiconductor industry. At 45x forward earnings, valuation is demanding but reflects quality: 95% recurring revenue, 35% operating margins, 18% revenue growth, and exposure to AI chip design without manufacturing capital intensity. The investment case: semiconductor complexity increases exponentially (AI chips, advanced packaging, automotive electronics), requiring ever-more sophisticated design tools. Cadence captures this as R&D spending ($100B annually) grows 10-15% independently of semiconductor sales cycles. Anirudh Devgan's AI-powered design platform creates new differentiation, potentially expanding TAM by $5-10B as system-level design adoption accelerates. Risks include semiconductor downturns (reducing R&D budgets) and valuation compression if growth decelerates below 15%. However, for growth investors seeking 15-20% annual returns through 2030, Cadence offers compelling risk/reward—structural tailwinds from AI, oligopoly pricing power, and capital-light software model. Position sizing: 3-5% in growth portfolios, trim above 50x P/E, accumulate below 35x during corrections.

Conclusion

Cadence is a high-quality growth stock suitable for 3-5% allocations in technology/growth portfolios. The stock merits a BUY below $280 (38x forward earnings), HOLD at current levels for existing holders, and trim above $360 (50x+ P/E). Not a sell unless growth decelerates structurally or semiconductor industry enters multi-year downturn. Recommended strategy: accumulate during semiconductor industry pessimism, hold through cycles capturing R&D spending growth, reinvest minimal dividends. This is a '10-year hold' software oligopoly with 15-20% annual return potential driven by semiconductor complexity, AI chip design, and EDA industry consolidation. Premium valuation justified by recurring revenue quality and irreplaceable market position.
Bull Case
$450 (50% upside) - AI chip design accelerates, margins expand to 40%, TAM expansion via system design
Base Case
$340 (13% upside) - Steady 15-18% growth, margin improvement continues, valuation stable
Bear Case
$220 (27% downside) - Semiconductor downturn, China revenue loss, competitive pressures intensify

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